Question

The expression 1.08s + 1.02b predicts the end-of-year value of a financial portfolio, where s is the value of stocks in dollars and b is the value of bonds in dollars in the portfolio at the beginning of the year. What is the predicted end-of-year value, in dollars, of a portfolio that begins the year with 200 dollars in stocks and 100 dollars in bonds?

Answer 1

To find the predicted end-of-year value of the portfolio, we substitute s = 200 and b = 100 into the expression:

End-of-year value = 1.08(200) + 1.02(100)
End-of-year value = 216 + 102
End-of-year value = 318

Therefore, the predicted end-of-year value of the portfolio is $318.